Last updated: July 21, 2023, 1:13 PM IST
Why are the markets falling today? After six consecutive days of wins and a stage, all was set for the Nifty50 to break the 20,000 mark for the first time in history on Friday, but Infosys proved to be the proverbial slip between cup and lip.
Selling into stocks was mostly seen across the board, sparing a few sectors including PSU Bank, Media and Realty. Nifty Smallcap 100 outperformed, but the midcap index traded in the red.
Sensex dipped 800 points to get below 67,000, while Nifty crunched 1 percent to the sub-19,800 level.
Market watcher Vinod Nair, Head of Research at Geojit Financial Services, said: “Domestic market sentiment was dampened by a weak start to the earnings season from IT bellwethers and their cautious outlook. The main risk to the market today is a downward revision of corporate earnings forecasts. In addition, lukewarm signals from global peers are fueling uncertainty, with investors anticipating a possible 25 basis point rate hike by the Fed at its next meeting.”
Here are some other possible reasons why the Sensex drops today:
Infosys Results
Shares of Infosys fell 10 percent in early deals after the IT bellwether lowered its FY24 outlook from 4-7 percent in the prior quarter to 1-3.5 percent in constant currency. As a result, the company invited a slew of downgrades from various brokers as they saw the company underperforming the industry in FY24.
Sale in Reliance shares
Shares of index heavyweight Reliance Industries plunged 2.8 percent amid selling pressure following the split of Jio Financial Services from its parent company. During a special trading session on Thursday, the value of JFSL shares was derived at Rs 261.85 and RIL shares are now trading ex-fork. RIL shares were also in the spotlight today as the Mukesh Ambani-led conglomerate will report its June quarter results, expecting a double-digit drop in earnings.
Technical concerns
While momentum indicators were bullish on Thursday, the market’s short-term structure appeared to be overbought, and so traders used the downtrend in IT stocks to gain in other counters as well.
Nasdaq spoiler
Amid sell-offs at Netflix and Tesla, the tech-heavy Nasdaq fell 2 percent last night and also had an adverse effect on Indian stocks. Tesla shares fell nearly 10 percent as the electric car maker saw profit margins eroded due to price cuts. Similarly, Netflix fell 8.4 percent due to missing revenue estimates.
What should investors do now?
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management said: “Markets have been on a downward trend over the past week as the IT sector saw a slowdown following a weak data set released by one of the majors. Concerns about the global economic outlook also affected mood; the strong growth reported by China did not significantly affect the bulls. In the near term, markets are expected to be volatile, led by highly stock-specific movements as earnings season is in full swing.”
Technical Outlook
Commenting on the technical outlook for Nifty, Deepak Jasani, Head of Retail Research at HDFC Securities said, “Nifty ended exactly flat on April 21 after recovering from morning weakness. In the end, Nifty was up 0.40 points at 17624.05. Volumes on the NSE were on the low side. Broad market indices ended negative even as the advance-to-fall ratio ended negative at 0.68:1. Nifty fell 1.14 percent over the week, forming a bearish engulfing pattern. 17842-17863 band will now be a crucial resistance for the Nifty. 17428 could be a support in the near term. Fourth quarter results have been a mixed bag and the broad market seems weary from a lack of fund purchases in small/mid caps.”
